Kumho Tire_Business Report FY2008

Business Highlights

-Thanks to increased exports and greater sales of high value-added products, sales reached a record high.

-Sales of tires totaled 2,327,013 million won, which accounted for 97.0 percent of the Company's overall sales.

-Exports made up 62.1 percent of the Company's total revenue.

Operating income

36,259

113,494

(68.1%)

-

Net income

(200,356)

(23,595)

-

-

Contracts

-Daimler

The Company and Daimler have concluded a supply agreement under which it will supply Daimler with around 10,000 tires for use in the Mercedes-Benz Viano X-Clusive to be marketed in Europe. The KU19 ultra high-performance tires (UHPs) will be 245/45R18 in size. It's tires have started being equipped on Mercedes-Benz' A-class vehicles since 2007. (From a press release on Feb. 27, 2008)

The Company has been selected by Ford Motor Company to supply original equipment tires for the the new 2009 Ford Focus models. It will supply approximately 200,000 of its 215/45R17 Solus KH16 tires for the Focus. These UHP tires provide a more stable ride while minimizing road noise. The Company now has supply contracts with all of the big three automakers in North America.(From a press release on Jul. 7, 2008) Facilities overseas

-U.S.A

In Mar. 2008, the Company established Kumho Tire Georgia, Inc. in Georgia, U.S.A. A tire plant of the this subsidiary is scheduled to be completed in 2010.

In Nov. 2008, the Company completed a truck and bus radial tire plant in Nanjing City.

-Vietnam

The Company held a ceremony to celebrate the completion of its new plant in Vietnam. This is the Group's fourth production facility outside Korea, following its three plants in China. The new facility has a land area of 315,000 square meters and is built in Binhduong Province. The Total amount of investment in this project is 200 million US dollars. It will have the capacity to produce 3.15 million tires initially, but this figure will be increased to 13 million in the future. (From a press release on Mar. 5, 2008)

R&D

R&D Structure

Facility

Location

Overview

Kumho R&D Center (K.R.D.C)

Gwangju, Korea

-Year established : 1981

-Developing tires for the domestic and global market

Kumho Tire America Technical Center (K.A.T.C)

Ohio, USA

-Year established : 1990

-Developing tires for the North American OEM market and the aftermarket

Kumho Tire Europe Technical Center (K.E.T.C)

Birmingham, U.K

-Year established : 1997

-Developing high-performance tires for the European market

Kumho Tire China Technical Center (K.C.T.C)

Tianjin, China

-Year established : 2006

-Developing high-performance tires for the Chinese and European markets

The Company held a gala groundbreaking ceremony at the construction site of its new research center in Yong-in, Korea. It plans to spend around 70 billion won in this project, which is scheduled to be completed in late 2009. The new research facility, which will be called the Central Research Center, will function as the Group's development hub, integrating and managing the company's R&D activities conducted inside and outside Korea. The Company also revealed its plan to nearly double by 2015 the number of research staff, which now stands at 600. (From a press release on May 15, 2008)

R&D Expenditure

(in millions of won)

-

FY2008

FY2007

FY2006

Amount

65,278

58,839

57,826

% of sales

2.72%

2.90%

3.19%

Investment Activities

Capital Expenditure

-In 2008, the Company invested 395,538 million won in plants and equipment, mainly for increasing production capacity.

-In 2009, the Company plans to invest 136,567 million won in plants and equipment, mainly for increasing production capacity.

Overseas Investments (FY2008)

-U.S.A

The Company will set up a tire plant in Georgia, U.S.A, planning to invest 165 million dollars in the first phase. This new facility will be equipped with an automated production system to make ultra high-performance (UHP) tires to be supplied to both the OEM and after-sales markets in the U.S.A. It will have the capacity to produce 2.1 million tires annually. Kumho's representative said, "Setting up a production facility in the U.S. will help us reduce delivery costs and continually increase our market share in the U.S." (From a press release on Jan. 28, 2008)

In May 2008, the Company held a gala groundbreaking at its new plant site in Georgia, U.S.A. The new facility, which will be built on 530,000 square meters of land in Macon, Georgia, will have the capacity to produce 2.1 million tires per year. It plans to spend 165 million US dollars in this project, aiming to complete construction of the plant in the late 2009. It is expected that, in 2008, the annual production capacity of the Group's operations overseas will reach 33 million tires, which will exceed the annual capacity (31 million tires) of its domestic operations in Korea. The Company's worldwide production capacity is forecast to reach 77 million tires in 2009, when both the Georgia facility and the Company's new tire plant in Nanjing, China are scheduled to be completed. The Nanjing plant will produce radial tires for use in trucks and buses. (From a press release on May 13, 2008)

The Company will suspend its ongoing plant construction project in Georgia, U.S.A. Hit by slowing vehicle sales in the U.S., it decided to postpone its construction schedule by one year. Construction was planned to be completed in late 2009. (From a press release on Dec. 2, 2008)